Assume the United States is operating above full employment.

Question

Assume the United States is operating above full employment.

1. Identify one fiscal policy tool that will solve the problem.
2. Using a correctly drawn and labeled AD/AS graph and loanable funds graph, show and explain how the policy you identified in (a) will affect each of the following in the short-run:
3. output and employment
4. price level
5. interest rates
6. Explain how the policy you identified in (a) will affect each of the following:
7. International value of the dollar
8. American exports (based on the changing value of the dollar)

Answer 1